Preliminary budget approved as proposed

The Whitefish City Council reluctantly passed a preliminary budget — less than four hours before the fiscal year ended.

The council held a special budget meeting on June 30. Councilors Chris Hyatt and John Muhlfeld were absent. Nine firefighters joined department heads in the conference room as talk turned to union concessions and tax protests.

After several hours of public input and council discussion, mayor Mike Jenson broke a 2-2 vote on councilor Turner Askew's motion to table the vote on turning city manager Chuck Stearns' proposed budget into a preliminary budget.

In the end, the council unanimously voted to approve the proposed budget with language tacked on by Askew. The council was approving the budget "for legal reasons' and intended to amend it in August when final property valuation numbers were provided by the state Department of Revenue.

"I don't want to stir up a hornets nest," Askew said.

Revenue shortfall

Askew said he didn't want to approve a budget that would be amended two months later. He wanted changes made sooner so the city wouldn't continue to spend money "and end up deeper in the hole."

Citing an updated budget spreadsheet that city financial officer Rich Knapp sent to the councilors after their June 16 meeting, Askew said the city's revenue projections were overstated by about $336,000.

Stearns, however, had noted on Knapp's spreadsheet that the $156,182 shortfall in tax revenue was "too conservative" because protested taxes had not come in and the six-year phase-in for the new property appraisals should increase tax revenue. Stearns said that figure should be reduced by $91,000.

For the rest of the special budget meeting, councilors referred to a "quarter million" shortfall in the proposed budget Stearns had presented on June 7. Councilors Askew, Phil Mitchell and Bill Kahle also questioned Stearns' revenue projections, particularly future growth where building fees were concerned.

Askew said he suspected the state was holding off settling tax protests in the Iron Horse subdivision, which accounts for about 25 percent of the city's total property valuation, because "they will be the difficult ones." That could mean a revenue loss to the city.

Mayor Mike Jenson defended the staff's efforts, considering that Stearns and Knapp came aboard in early 2008 shortly after the former city financial officer died, leaving a large institutional knowledge gap. Jenson also reacted to Askew's criticism of Stearns' proposed budget.

"Would you do six to nine layoffs in the next three months to get a $200,000 reserve?" he asked.

"I just want a budget that will work next year," Askew replied.

Mitchell noted that he has received numerous calls from Whitefish residents who were without work and were worried about losing their homes. Rather than raising taxes on these residents, the city could face even more layoffs in August if it finds itself in an even deeper hole in August, Mitchell said.

"At the same time, we're hearing people say don't cut services," councilor Ryan Friel pointed out. "People want fires put out at their homes."

Stearns said the council needs to prioritize what it wants to do, but the budget must be balanced.

"You could get rid of zoning, but you need to follow state law," he said.

Union offers

The proposed budget called for laying off a police officer, a firefighter and a parks worker by July 31, moving a public works project manager from full-time to half-time, and not replacing a former police detective and the city animal control officer when they retire.

Stearns said he timed the layoffs to happen at the end of July so the councilors would have time to carefully consider them.

"Those are the layoffs you propose," Askew said. "We have no reserves. Where do we find the money to keep on operating?"

Stearns said the city could rely on short-term loans until it learns of the exact property valuations from the state in August. That could include interfund loans or borrowing from a bank. He also noted that he had delayed the forced early retirement of the former police detective for two weeks because of the police union's offer.

Although the Whitefish Police Protective Association had not officially reopened their contract, they had communicated an offer through e-mails with the councilors, Stearns said. The offer called for forgoing a 6.2 percent pay increase for one year and accepting one layoff, leaving 16 sworn officers.

Even with the $100,000 allocated in the budget for the two retirements from the police department, the police offer balanced layoffs with a pay freeze. That couldn't be said for the fire and ambulance department.

The International Association of Fire Fighters local did reopen its contract, but its proposal to forgo a 4.2 percent pay raise also called for no layoffs for two years. The pay freeze amounted to a $47,856 budget savings, while the proposed layoff amounted to $78,000.

The firefighters' current contract, with the 4.2 percent pay increase, went into effect on July 1, the beginning of the new fiscal year, but Stearns said he would continue to negotiate with the firefighters.

Noting that he doubted the firefighters would renegotiate their contract, fire chief Thomas Kennelly said he planned to go "lean and mean" in the next fiscal year. Eliminating some training costs, leasing some equipment for wildfires and other savings steps might make the difference between a pay freeze and a layoff.

An agreement with the 20 workers in the public works department was settled the night before the special budget meeting. While the workers agreed to a pay freeze and no layoffs, they each got a $500 signing bonus. The public works department workers are paid by utility fees, not property taxes.

The city also agreed to pay the projected $12,000 increase in health insurance premiums for the public works department workers. Stearns said it would be in the city's interest to offer the same to the police and firefighters to maintain equity among the departments.

A balanced budget

Talk about union offers had moved the special budget meeting into a gray area.

"I need to negotiate with the unions, and you get the budget," Stearns said. "It's not a good idea to get the council involved in labor negotiations."

Stearns' proposed budget also called for levying the full amount of the 24-mill levy approved several years ago by voters for implementing 24/7 emergency service. The additional 11.65 mills would mean a $91.25 annual property tax increase for a home appraised at $300,000.

On top of that is the continuing negotiations between the city of Whitefish and the Whitefish Fire Service Area's board of trustees, which appear to have bogged down. Loss of the contract could cost the city $230,000 in revenue.

Askew noted that he had received two letters from rural residents asking the city not to lay off any firefighters.

"Why don't they talk to the Whitefish Fire Service Area board?" he asked.

When pressed by the councilors for a "Plan B," Stearns pointed to his head and said he had other ideas, but he wasn't ready to go public with them just yet.

"We could ask for more taxes," Mitchell pointed out rhetorically. He then provided several small concrete budget-cut proposals to get the ball rolling.

"You just took a balanced budget and made it unbalanced," Stearns said.

Noting that making cuts with two councilors absent wasn't a good idea, Mitchell agreed to wait until Aug. 15 when more information would be available and a final budget could be created. Kahle said he wanted a unanimous vote, and Askew finally agreed.